How Protocol Power Is Reshaping Web3 and DePIN Networks

The future of the internet may not be decided by the applications built on top of it, but by the rules governing the systems underneath.

In the world of Web3 and Decentralized Physical Infrastructure Networks (DePIN), protocols aren’t just technical frameworks but political systems. They determine who controls data, who receives economic rewards, how disputes are resolved, and whose interests shape the evolution of decentralized ecosystems.

To understand why this matters, we need to look beyond applications and examine how underlying systems shape power, coordination, and control over time.

The Maturation of Crypto: Why Governance Now Matters Most

For the longest time, crypto was mostly utilized as a speculative tool, but as blockchain technologies mature, the attention is shifting away from hype toward infrastructure, governance, and long-term coordination.

At the center of this transition is Web3, which rebuilds the internet’s foundations around decentralization and shared governance. Web3 refers to a new internet built on blockchain technology that decentralizes data ownership and control through distributed ledgers, smart contracts (programs that automatically execute upon meeting specified conditions), and digital assets such as cryptocurrencies, stablecoins, tokenized assets, and NFTs.

Instead of centralized corporations controlling platforms and data, Web3 distributes ownership and governance among users, developers, and network participants. It introduces trustlessness, meaning users don’t need to rely on third parties to manage data or transactions. The system aims to create interconnections among diverse technologies so data and value flow seamlessly between platforms, while removing geographical barriers to communication and limiting censorship from corporations and governments.

Research highlights¹ that these systems are designed to improve transparency, trust, censorship resistance, and user sovereignty.

A subset of Web3 is DePIN, which extends its principles to the physical world by decentralized real-world infrastructure such as wireless networks, cloud storage, mapping systems, sensor networks, energy grids, and compute resources.

Recent research² describes DePIN as a rapidly emerging model combining blockchain systems, IoT devices, and tokenized governance to coordinate real-world infrastructure at scale.

Rather than relying on a single telecom provider or cloud company, DePIN distributes ownership across thousands of contributors. While centralized platforms also depend on community contributions to build networks of resources for millions of users, they maintain complete control over pricing and access.

Meanwhile, DePIN comprises three layers. The first one is the physical infrastructure, which could be a sensor, a solar panel, or a GPU cluster, and is managed by an individual. Then comes the middleware that connects the physical infrastructure with the blockchain by gathering data from each provider’s facility and relaying it to the network. Then comes the blockchain, to which the middleware sends the data, and it acts as an administrator and a payment system.

DePIN promises lower infrastructure costs, greater resilience, community ownership, and reduced dependence on centralized monopolies. But under these promises lies a layer of coordination that decides how power, value, and decision-making are distributed across the network.

To motivate participation, both web3 and DePIN systems rely on token incentives. In exchange for deploying and maintaining the infrastructure, independent contributors receive token rewards.

But if these reward systems are poorly designed, a study from 2021 titled “A novel framework for policy based on-chain governance of blockchain networks”³ suggests it can create unhealthy concentration effects, speculative behavior, or infrastructure imbalances. This makes strong governance design essential for maintaining long-term network sustainability.

Also, the use of blockchain technology doesn’t guarantee decentralization. In fact, governance concentration, validator monopolies, or venture-backed token ownership can create the very same power structures in these decentralized systems that traditional services have.

Research on decentralized search and indexing systems shows⁴ just how difficult it is to truly achieve censorship resistance and distributed coordination in practice.

Governance, in particular, is a complicated issue for blockchains due to their decentralized nature, but it is essential for the long-term viability, security, and legitimacy of a network. It provides the rules and procedures for resolving disputes, approving upgrades, adapting to changing conditions, balancing stakeholder interests, and preventing manipulation.

Without credible governance, decentralized systems risk fragmentation or capture by powerful actors. Understanding how these underlying rules take shape and how they quietly concentrate or distribute power requires looking into how digital protocols have formed, scaled, and evolved.

Protocols as Power: The Hidden Politics of Digital Infrastructure

A recent study titled “From local hacks to global standards: The hidden politics of internet protocols⁵,” published in Science Direct, conducted an analysis of how the internet is actually governed, i.e., protocols and standards.

In this academic analysis, authors Matthew Zook, Department of Geography, University of Kentucky, USA, and Ate Poorthuis, Department of Earth and Environmental Science, KU Leuven, Belgium, argue that protocols aren’t just technical tools but ‘stacked spaces.’

These stacked spaces, which are dynamic processes that “emerge from localized efforts but can rapidly scale into global standards, posing unique governance challenges.”

With our social lives increasingly being digitized and underpinned by protocols, reviewing the governance of these protocols offers insight into the power and agency embedded in digital infrastructure and pathways to more resilient and equitable governance of digital spaces, notes the study. It said:

“Studying protocol governance matters as they quietly allocate power as informal decisions harden into durable global rules long before most stakeholders notice their implications.”

The protocols, aka stacked spaces, are layered systems shared by a few key factors. This includes actors, who do the work and involve individuals, firms, states, and communities, localization, where work, including decisions and maintenance, happens, i.e., places and networks, and formality, which means how work is done, ranging from informal practices to formalized processes.

So, instead of seeing the internet as a neutral, global system, the study shows that it is built through localized decisions that scale into global power structures. And this is the core insight of the study that many foundational internet systems start small.

In the beginning, these protocols are informal projects run by a few individuals or close-knit communities, and their purpose is to solve very specific local problems. But over time, these small and specific systems scale into global standards.

Because the governance of internet protocols, unlike physical infrastructure, doesn’t require large capital expenses or institutional backing, and they can expand into global standards relatively quickly, “impromptu communities or even single people can emerge as central and powerful actors in shaping the digital world.”

For instance, the Internet Protocol (IP) was invented in the 1970s by Defense Advanced Research Projects Agency (DARPA) scientists, Vint Cerf and Bob Kahn, to interconnect separate, heterogeneous computer networks for military and research purposes. Today, it has become the backbone of the internet, determining how data travels across it.

So, the IP started as a technical addressing system but became the backbone of global communication.

Yet another example is the General Transit Feed Specification (GTFS), an open standard format for recording transit information that enables navigation of public transportation on our phones, which began as a local solution in Portland and is now a global transit data standard.

Then there’s the time zone (tz) database, a compilation of time zones for locations around the world. While critical to billions of devices, it is largely maintained by a handful of individuals.

This shows that massive global systems can be dependent on informal governance foundations that are surprisingly fragile.

When Informality Breaks: Governance Failures at Scale

Many critical protocols, even today, are governed through fairly simple means, such as mailing lists, individual maintainers, and ad hoc decision-making. While these digital protocols are extremely significant, their governance can be surprisingly informal.

But while, at the beginning, these kinds of governance systems aren’t a big deal, they create efficiency at this stage. In fact, such informal governance introduces systemic fragility when adoption increases, and these very protocols become critical to the masses.

For instance, the XZ Utils incident in 2024, in which attackers gained influence through long-term social engineering. That attack on the widely used open-source compression software wasn’t a technical failure but a governance issue.

The dangerous vulnerability discovered in XZ Utils enabled backdoor access to potentially millions of computers.

The technical vulnerability that was hidden deep within the hierarchical system was introduced by bad actors who obtained administrative rights over the source code, resulting from a long-term, social-hacking effort focused on the sole overseer of XZ Utils. This shows that governance weaknesses are security risks for protocols.

Moreover, while people may see these protocols as neutral, they are not, as they embed elements like political decisions, cultural assumptions, and geographic biases.

This is highlighted by the controversy surrounding the spelling of the Ukrainian capital city, which was changed from Kiev (associated with Russian transliteration) to the Ukrainian official transliteration Kyiv, reflecting geopolitical tensions.

Other examples include IP allocation conflicts, such as the AFRINIC case, showing how economic value and governance ambiguity create power struggles.

The thing is, as protocols expand, they face a tension between global consistency, which requires standardization, and local specificity, which needs flexibility. This leads to fragmentation, local flavors, and governance disputes. The study stated:

“While informal governance provides flexibility and efficiency, it often becomes fragile when faced with the demands of localization, the intervention of state or corporate actors, or malicious exploitation.”

This kind of tension is simply unavoidable, and as a matter of fact, it only becomes more intense as systems scale. And the more and faster a system scales, the greater the pressure for it to formalize. Formalization provides stability and greater legitimacy, but, of course, it also means slower decision-making and the risk of bureaucratic capture. The standardization of systems also means small actors may get excluded over time.

The study concludes that uneven arrangements of authority and coordination appraise some interests while marginalizing others. This reveals that for digital protocols to achieve systemic compatibility, they must evolve at both the global and the local level, which are usually “always in productive tension.”

Digital protocols, the study notes, both shape and are shaped by the digital spaces they support, reflecting the priorities of their developers, the places they connect, and the work required to maintain them. But most importantly, these protocols are not rigid and are best analyzed as ongoing processes.

Reading Protocol Politics: A Framework for Investors

DAO governance places votes on-chain, creating transparency. But transparency is not the same as distributed influence. In fact, research shows the top 100 addresses control more than 80% of voting power across major protocols like Aave, MakerDAO, and Uniswap. At Aave, the co-founder and Aave Labs reportedly received 233,000 delegated tokens that played a key role in passing a recent proposal.

To evaluate whether a protocol’s governance is genuinely decentralized, investors should assess three markers:

• Can token holders outside the founding team realistically influence or block proposals?
• Does the protocol retain independent developers over time, or is development concentrated among insiders? Persistent core team turnover can indicate governance instability or coordination issues.
• Is the protocol aligning with widely adopted standards such as ERC-20 that support broader ecosystem interoperability, or operating within a more isolated framework?

These signals help distinguish genuine decentralization from visibility alone.

The New Battleground: Protocol Politics in Decentralized Infrastructure

“Crypto protocols are meant to be governed by decentralized communities of stakeholders. Not because it’s more efficient, or important for ideological reasons, but because it’s necessary to unlock their core value proposition,” states a16Z on crypto governance.

Web3 and DePIN systems resemble early internet protocols with their small teams, rapid growth, and informal governance. Per the latest study, these features are likely to lead to governance crises, coordination breakdowns, and increased vulnerability to manipulation.

While the study does not mention Web3 or DePIN specifically, it points out that protocols like Bitcoin (BTC ) should be analyzed to better understand the power and agency points embedded in the governance of digital spaces. So, it does predict many of their current and future challenges.

The key challenge for decentralized crypto protocols, actually for all digital spaces, is identifying when a particular governance approach becomes unsustainable.

Determining this transition moment is not only difficult but also contentious, with disagreements over who makes the decision about the timing and processes for formalizing protocols.

Additionally, Web3 tends to put too much emphasis on code. It assumes that smart contracts and protocols can eventually replace traditional governance. But as the latest study has shown, protocols always embed layers of human decision-making. Governance may not always be visible, but it is there.

So, the real power in Web3 and DePIN actually lies in protocol upgrades, validator control, token governance, and off-chain coordination.

When it comes to DePIN, it faces a far greater risk of protocol politics given its governance of the physical infrastructure and real-world economic value. The stakes are amplified here, with the potential to turn into resource-allocation conflicts and jurisdictional issues. And if governance fails, then that affects real-world services.

Furthermore, the study has shown that power tends to concentrate in the hands of a few powerful actors, including individuals, corporations, and even states. For Web3 and DePIN, this can translate into risks like validator centralization, concentration among a few large token holders, the foundation gaining dominance over the protocol, and regulators dictating the rules.

The study particularly points out that as digital space develops, the role of founding actors diminishes and consensus-driven governance becomes more prominent. This democratization, as per the study, can bring inclusivity and allow input from new actors and locales, but it also introduces inefficiencies, opens the door to bad actors, and even dilutes the protocol’s usefulness.

Moreover, as the blockchain space evolves and regulatory scrutiny over it grows, we may end up having multiple competing protocol ecosystems.

What the latest study talks about the future of Web3 and DePIN is that governance design will determine success more than technology, and protocol politics will shape everything from ownership to control and access to the infrastructure in the coming years.

“Protocols are not only technical systems but also spaces of power and agency where global competition among states, corporations, and communities plays out,” said the study.

Conclusion

Web3 and DePIN have introduced a new way of interacting with the internet by giving users more control over their data and ownership. They shift control of digital and physical infrastructure away from centralized powers and towards community-owned networks. But they are still susceptible to politics; in fact, they are rebuilding that right at the protocol layer.

The study on internet protocols makes it very clear that digital infrastructure is never neutral and standards are never technical. Also, governance decisions are made early and informally, which define global systems. And as decentralized technologies scale, they will face the same tensions: local vs global, efficiency vs legitimacy, and openness vs control.

The difference with these new technological revolutions is that the stakes are higher, as Web3 and DePIN are not just coordinating information but also managing value and real-world resources. And if they ignore the hidden politics of protocols, these systems can risk reproducing the very centralization they aim to replace.

But with a better understanding and more intentional design of Web3 and DePINs platforms, protocol governance could enable a more transparent, participatory, and resilient foundation for the next generation of the internet.

References

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2. Ullah, A., Pinna, A., Lunesu, M. I., Destefanis, G. & Tonelli, R. The DePIN phenomenon: Characteristics, reward architecture, and practical implementations. ICT Express (2026). https://doi.org/10.1016/j.icte.2026.02.005
3. Dursun, T. & Üstündağ, B. B. A novel framework for policy based on-chain governance of blockchain networks. Information Processing & Management 58(4), 102556 (2021). https://doi.org/10.1016/j.ipm.2021.102556
4. de Vos, M., Ishmaev, G. & Pouwelse, J. DeScan: Censorship-resistant indexing and search for Web3. Future Generation Computer Systems 152, 257–272 (2024). https://doi.org/10.1016/j.future.2023.11.008
5. Zook, M. & Poorthuis, A. From local hacks to global standards: The hidden politics of internet protocols. Digital Geography and Society 11, 100174 (2026). https://doi.org/10.1016/j.diggeo.2026.100174</sup>